Genetech/Xoma restructure Raptiva deal

Biotechnology company, Xoma, says that it has restructured its collaboration agreement with Genentech for the psoriasis drug, Raptiva (efalizumab), and in return for reducing its sales-related royalty, its partner has agreed to write off a loan.

Xoma said that the revised agreement became effective on January 1, and as a result, Raptiva will immediately become profitable for the company.

Under the terms of the new agreement, Xoma will earn a mid-single digit royalty on worldwide sales of Raptiva, with an additional royalty rate on sales in the USA above a specified level. In return, Genentech has agreed to discharge Xoma’s obligation to pay the $40 million balance on a development loan plus accrued interest and to allow repayment of Xoma’s fourth quarter share of Raptiva operating losses by offsetting them against future royalties. The original agreement gave Xoma a higher worldwide royalty rate structure, but required immediate repayment of the development loan. By selecting the royalty option, Xoma says it is no longer be responsible for funding any development or sales and marketing activities or have the right to co-promote Raptiva.

“Our goal over the next three years is to make Xoma profitable while continuing to strengthen and deepen our product pipeline,” said John Castello, chairman, president and chief executive officer of Xoma. “This is a challenging goal, but the restructuring of our agreement with Genentech is a critical first step.”